EU Businesses Cut U.K. Ties on Brexit and Want Britain Punished

(Bloomberg) -- British businesses aren’t the only ones unhappy with the state of Brexit negotiations. Companies in the rest of the European Union aren’t thrilled either.

Exactly two years after the referendum, nearly half of 800 executives surveyed across six EU countries by law firm Baker McKenzie said their businesses had reduced investment in the U.K. since the Brexit vote, according to a report published Monday. While 75 percent said the EU should make concessions to the U.K. to secure a better trade deal for their businesses, more than a third also wanted to see Britain punished.

The report gives a rare insight into the views on Brexit from businesses outside the U.K. and comes after Airbus SE said last week it might pull its investment from Britain in the event of a no-deal scenario. While British companies have been creating contingency plans to try to avoid chaos post-Brexit, their EU counterparts have been less forthcoming.

That may be changing. EU leaders are poised to warn the U.K. after this week’s European Council summit that a breakdown in talks is a real possibility, people with knowledge of the situation told Bloomberg last week. The leaders are considering instructing their own governments to step up contingency measures to cope with such a scenario, the people said.

“The clock continues ticking on a Brexit deal and, without any clarity as to its final shape, businesses in both the EU and U.K. are inevitably having to take matters into their own hands,” said Ross Denton, a trade lawyer at Baker McKenzie. This could hurt “the U.K. economy in the long run if, as our survey suggests, EU27 businesses continue to rethink or pull the plug on their U.K. investments.”

Participation Lacking

Survey respondents bemoaned a lack of participation in the negotiations, with 54 percent saying they hadn’t been properly consulted on Brexit. A similar number said their views hadn’t been well represented in the talks.

The surveyed executives are at businesses in France, Germany, Spain, the Netherlands, Sweden and Ireland. All work at companies with at least 250 million pounds ($332 million) in annual revenue, with 32 percent exceeding 1 billion pounds.

The idea of a free-trade agreement rather than a customs union between the EU and U.K. was seen as more important to business, the report showed, and nearly half of those surveyed had already seen disruption to their supply chains from the Brexit vote. British lawmakers are due to vote on the U.K.’s customs bill in July.

Paris beat London as the most attractive European city for investors for the first time in more than a decade in an annual Ernst & Young report this month. While the U.K. still topped the league tables with 1,205 of 6,653 new foreign-direct-investment projects last year, the number was only 6 percent higher than in 2016, compared with 31 percent more investments for France.

“Multinational companies will base themselves in countries with easy trading links and the right skills and infrastructure,” Rachel Reeves, chairwoman of Parliament’s Business, Energy and Industrial Strategy Committee, said Friday in response to the Airbus announcement. “This is not Project Fear -- it is economic reality.”

©2018 Bloomberg L.P.

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